Your student loan interest deduction for 2009 is generally the smaller of:
- $2,500, or
- The interest you paid in 2009.
However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. You can use Worksheet 5-1
(at the end of this chapter) to figure both your MAGI and your deduction.
To help you figure your student loan interest deduction, you should receive Form 1098-E. Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2009 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by February 1, 2010.
For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. See Allocating Payments Between Interest and Principal
The lender may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the borrower's name, address, and taxpayer identification number. The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. taxmap/pubs/p970-029.htm#en_us_publink1000178283
The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($120,000 and $150,000 if you file a joint return). You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($150,000 or more if you file a joint return). taxmap/pubs/p970-029.htm#en_us_publink1000178284
For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. However, as discussed below, there may be other modifications.
Table 5-2 shows how the amount of your MAGI can affect your student loan interest deduction.
Table 5-2. Effect of MAGI on Student Loan Interest Deduction
|IF your filing status is...||AND your MAGI is...||THEN your student loan interest deduction is...|
head of household, or qualifying widow(er)
|not more than $60,000||not affected by the phaseout.|
|more than $60,000 |
but less than
|reduced because of the phaseout.|
|$75,000 or more||eliminated by the phaseout.|
|married filing joint return||not more than $120,000||not affected by the phaseout.|
|more than $120,000|
but less than $150,000
|reduced because of the phaseout.|
|$150,000 or more||eliminated by the phaseout.|
If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (Student loan interest deduction) and line 19 (Tuition and fees deduction).taxmap/pubs/p970-029.htm#en_us_publink1000178288
If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (Student loan interest deduction), line 34 (Tuition and fees deduction), and line 35 (Domestic production activities deduction), and modified by adding back any:
- Foreign earned income exclusion,
- Foreign housing exclusion,
- Foreign housing deduction,
- Exclusion of income by bona fide residents of American Samoa, and
- Exclusion of income by bona fide residents of Puerto Rico.
If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 32 (Student loan interest deduction) and line 33 (Domestic production activities deduction).taxmap/pubs/p970-029.htm#en_us_publink1000178290
If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (Student loan interest deduction).taxmap/pubs/p970-029.htm#en_us_publink1000178291
If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. The numerator is your MAGI minus $60,000 ($120,000 in the case of a joint return). The denominator is $15,000 ($30,000 in the case of a joint return). Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. taxmap/pubs/p970-029.htm#en_us_publink1000178292
During 2009 you paid $800 interest on a qualified student loan. Your 2009 MAGI is $145,000 and you are filing a joint return. You must reduce your deduction by $667, figured as follows.
| ||$800||×|| $145,000 − $120,000 |
Your reduced student loan interest deduction is $133 ($800 − $667).
The facts are the same as in Example 1
except that you paid $2,750 interest. Your maximum deduction for 2009 is $2,500. You must reduce your maximum deduction by $2,083, figured as follows.
| ||$2,500||×|| $145,000 − $120,000 |
In this example, your reduced student loan interest deduction is $417 ($2,500 − $2,083).
Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. However, if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 5-1
at the end of this chapter.